Santoli: The earnings recession is ending

But will this be enough to provide an added boost to a stock market that has survived the profit downturn intact, borrowing its strength from bonds while becoming no cheaper in the process?

As reporting season gets rolling this week, the consensus forecast for S&P 500 companies' second-quarter earnings is a decline of 5.6 percent from a year earlier, according to FactSet. This would be the fifth straight quarter of lower year-over-year profits.

The "typical" quarter sees companies in aggregate report better-than-expected numbers, with the average margin of upside running around four percentage points. If the pattern persists, companies have an outside shot of ending about even with the 2015 period. The current forecasts for the third quarter are for a slight dip of less than 1 percent in profits, followed by a more notable bounce-back in the fourth quarter.

So, one way or another, the prolonged contraction in Corporate America's profitability appears set to end within either weeks or months. Most of the rebound owes to the passage of time: We are moving beyond the effects of the oil crash and U.S. dollar surge that took hold early last year.

Thomas Lee
of Fundstrat Global Advisors, sees a few other encouraging clues pointing to a sturdier fundamental outcome during this profit season. The pace of positive company "preannouncements" for the quarter is the highest since early 2011 and the rate of downside warnings the lowest since the same quarter. Lee also points out that the ISM manufacturing survey's exports component is back in growth mode, and corporate interest costs have fallen more as the bond market has rallied.

Is it strange that Wall Street is heralding the end of more than a year of weakness in corporate performance, while the broad stock market appears no worse for the ordeal?

With Friday's surge after a reassuring employment report, the S&P 500 closed within a point of its all-time closing high – set in May 2015, right before the earnings recession began. It's as if someone emerged from a long illness having lost no weight, missed only a few days of work and took a couple of vacations along the way.